The Big Picture

 

The SPY this week finally tickled into correction territory and while we are expecting some further continuation to the downside as the lows tend to be much more painful than we would like them to be. We need to be aware than the bounces need to be looked at as gifts to take advantage of as of. Just like in February when most wanted to start shorting it was the time when we need to start looking up.

The small caps all year have been showing us a sneak behind the curtain, they were the first to take out pre correction highs, they were the first to break major support and the same to also the first (almost) retest the prior correction lows. Instead of wasting your time on the SPY, keep an eye on the place that has been giving us the clues first (IWM). When we were at highs and we said how we expected to still take out new lows on the year it seemed far fetched however now, everyone seems to be on board with that notion. This is the time to set aside made up theories and time to start hunting for some charts. 

Small caps, Mid caps, Defense, Bio's, Industrials, Materials, and Energy all are showing us signs that there are great deals in these spaces, while in Tech, REITs and Financials might need some time.  

As you might have started to notice we have been focusing on the larger cap blue chip names, that tend to not get as beat up during rocky times, now they still can don't get me wrong, however a name like BA compared to a small cap bio, the large cruise ships tend to handle the rouge waves much better than the tiny speed boats.

As a group this week, it was another impressive week to see the teamwork and the large number of members being patient, sitting in cash. While some of the more risk on traders cleaned up such as Michael putting up a $10k week and Dangerous Dave putting up a $15k day. With that being said a major red flag was the disassociation of risk, when we are right we often fall on the crutch of "it was a calculated risk" however when we are wrong, it tends to be "the market is shit." Fast gains are great, just remember that the real money takes time.

Stocks I will be keeping an eye on for the week ahead CVX 112, WMT 100, KO 46.50, XOM 78, DWDP 54, UTX 126, CSCO 46, JPM 106, BA 370 and HD 180.  

We saw how some buyers started to come in after we took out the recent low and we are bound for a bounce or two as its hard for the overall market to just free fall day after day, it needs some chop to trap the crowd. We are starting to get into the area where the value buys are, however expect these "h" patterns to continue to the downside until we get a really good shakeout. 

 Mid caps which have been following the Small Caps got with in points of retesting the prior correction lows. Will be looking to DCA above the prior days high.

With Japan breaking recent support, its off the table for a bit.

Emerging Market still in the macro downtrend.

RSX Russia +$30 12 Month Target 

10 Year Treasury Note Yielding 3.20%

As rates continue to rise we will continue to see the 10 year inch higher which crushes bond prices as you will see below the bond market just put in a new low as the 10 year is putting in a new high. 

As rates rise expect to see the bond market continue to put in new lows.

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